Bangladesh’s 2008 Article IV Consultation reports that growth picked up strongly from a slow start to the year with rebounds in agriculture and garment exports playing a leading role. Strong growth of remittances and increased external assistance helped support the balance of payments in the face of rising import costs. An impressive increase in government revenues, bringing state-owned enterprise losses onto the budget, and the substantial increase in administered prices have been significant achievements.


Bangladesh’s 2008 Article IV Consultation reports that growth picked up strongly from a slow start to the year with rebounds in agriculture and garment exports playing a leading role. Strong growth of remittances and increased external assistance helped support the balance of payments in the face of rising import costs. An impressive increase in government revenues, bringing state-owned enterprise losses onto the budget, and the substantial increase in administered prices have been significant achievements.

Annex I. Bangladesh: Fund Relations

(As of June 30, 2008)

I. Membership Status: Joined August 17, 1972; accepted the obligations under Article VIII, Sections 2, 3, and 4 on April 11, 1994.

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Financial Arrangements:

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VI. Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Safeguards Assessment

Under the Fund’s safeguards assessment policy, Bangladesh Bank (BB) is subject to an assessment with respect to the PRGF arrangement, which was approved on June 20, 2003. A safeguards assessment of the BB was completed on January 24, 2005. The assessment concluded that substantial risks exist in the legal structure, financial reporting, internal audit, and internal control systems. Implementation of the measures by the BB is monitored by staff.

VIII. Exchange Arrangement

Exchange regime. The exchange rate regime is a managed float. The de facto classification will be changed to a conventional peg given recent stability in the dollar rate. Until end–May 2003, the taka was fixed to the U.S. dollar, but was periodically adjusted. It was devalued on three occasions during 2000–02, when the trading band for BB’s transactions was correspondingly widened or raised. From January 2002 until end–May 2003, the official band for the taka remained unchanged at Tk 57.4–58.4 per U.S. dollar. Authorized dealer (AD) banks set their own buying and selling rates for the U.S. dollar and other currencies generally within the band until October 2002. From November 2002, however, AD banks have set rates outside the band. Effective end–May 2003, BB no longer announced a trading band for its foreign exchange transactions.

At the last Article IV consultation (June 2007), the Executive Board urged the authorities to remove the restriction on the convertibility and transferability of proceeds of current international transactions in nonresident taka accounts.

IX. Article IV Consultation

The previous Article IV consultation was concluded on June 22, 2007 (IMF Country Report No. 07/234).

X. Resident Representative

The resident representative office was established in 1972. The current Resident Representative, Mr. Jonathan Dunn, took up the post in August 2004.

Annex II. Bangladesh: Fund and World Bank Work Priorities

Issues affecting economic growth

The following issues have been found to foster or constraint economic growth in Bangladesh according to the PRSP and a number of analytical studies. Macroeconomic stability correlates with growth in Bangladesh and is a centerpiece of the PRSP. Given the country’s exceptionally low tax receipts, revenue mobilization and expenditure rationalization are key to this stability. Outward orientation and trade liberalization hold great promise, given low wage costs, the success of the export–oriented RMG sector, and a still relatively closed economy. However, poor governance, a weak banking sector, and unreliable power supply are major drags on growth. Notwithstanding the recent progress, Bangladesh ranks near the bottom of Transparency International’s corruption perceptions index; interest rate spreads exceed regional averages; and the World Bank estimates that power outages significantly reduce total factor productivity growth in manufacturing. Sectoral policies are the main vehicle for ensuring equitable and pro–poor growth according to the PRSP.

The Bank and Fund staffs (and other relevant donors) continue to work closely together to support this agenda of enhancing economic growth, as defined in the following matrix.

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Work Programs

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Annex III. Bangladesh: Relations With the Asian Development Bank1

Lending and technical assistance operations

Bangladesh joined the Asian Development Bank (AsDB) in 1973 and, as of 31 December 2007, cumulative public sector lending amounted to about $9.27 billion for 186 loans, with $178.6 million for technical assistance (TA) grants for 324 projects. The country is one of the largest borrowers of concessionary Asian Development Fund resources. The loans and TAs have supported all key sectors including energy, transport, social infrastructure, agriculture, and natural resources. AsDB has also supported eight private sector projects worth $242.18 million, including the Meghnaghat Power Project—the first build–own–operate power project in the country—and GrameenPhone, which substantially expanded rural access to mobile phone services.

In 2007, AsDB approved a total amount of $965.7 million in loans covering the Railway Sector Investment Program, Sustainable Power Sector Development Program, the Good Governance Program, the Padma Multipurpose Bridge Design Project (TA Loan), the Dhaka Water Supply Sector Development Program (Project Loan), and the South Asia Subregional Economic Cooperation Information Highway Project. The projects focused on helping remove critical constraints to growth by improving power generation and transmission; transport and communication network; management and operations of urban water supply and sewerage; anticorruption and judicial reforms; governance in the energy, transport, education, and integrated urban infrastructure sectors. Energy reforms aimed to help the Government restructure the power sector to ensure adequate and reliable power supply at competitive prices through increased private sector participation and more effective management and operations. In the railways, the focus was on improving sector efficiency by restructuring Bangladesh Railway to make it a market–oriented business organization with better financial governance, human resources, and operational systems. Successful implementation of the Second Primary Education Development Program, which will improve the quality of primary education and its accessibility to children from poor households, is currently underway with AsDB as the lead agency, together with 10 other development partners.

Country Partnership Strategy

The current results–based country partnership strategy (CPS), covering the period 2006–10, is part of a joint strategy prepared with the UK’s Department for International Development, Government of Japan, and World Bank. Under this CPS, AsDB is playing a major role in the energy, transport, education, urban health, and urban water supply and sanitation sectors. In other areas, such as agriculture (i.e., agribusiness), water resources management, the financial sector and small–and medium–sized enterprise development, AsDB is supporting initiatives led by other development partners. Disaster mitigation, regional cooperation, gender, and environment continue to be addressed as key crosscutting issues. The CPS emphasizes designing projects that are better prepared for implementation. This means projects that are simpler; take into consideration capacity constraints; and include covenants that are realistic, focused, and properly sequenced.

AsDB’s 2008 public sector lending program comprises five firm projects totaling about $592 million (including two Emergency Assistance Projects – Emergency Disaster Damage Rehabilitation Project of $120 million and Emergency Assistance for Food Security of $170 million. The first project was included in the pipeline considering the devastating cyclone and flood that affected Bangladesh in 2007 and the second project, to address the adverse impact of rising international commodity prices on domestic food security). The TA program for 2008 consists of 9 projects with an allocation of $5,740 in grant funding (including two piggy–backed loan for the two Emergency Assistance Projects).

The proposed (to be approved in August 2008) country operations business plan (COBP) for Bangladesh for 2009–11 consists of 25 firm projects totaling about $2.9 billion (including an amount of $350 million for Padma Multipurpose Bridge in 2010). The TA program for 2009–11 comprises 25 projects with an annual allocation of about $6.4 million in grant funding.

Cofinancing operations enable AsDB’s financing partners—government or their agencies, multilateral financing institutions, and commercial organizations—to participate in financing of AsDB projects. The additional funds are provided in the form of grants, official loans, or credit enhancement products. As of year–end 2007, cumulative direct value–added cofinancing for Bangladesh amounted to $1.1 billion for 24 investment projects and $58. million for 68 TA projects.

The CPS is aligned with the vision and priorities of the Bangladesh’s national poverty reduction strategy, which aims to achieve the MDGs, including halving the number of poor people in the country by 2015 and delivering substantial improvement in almost all aspects of human development. The four partners’ joint strategy is built on: (i) improving the investment climate for private sector–led growth and employment; (ii) advancing the social development agenda to empower the poor so that all benefit from growth; and (iii) addressing key governance issues to enable growth and social development.

Economic and sector work program

AsDB publishes its Asian Development Outlook and its update every year, in which it assesses macroeconomic performance. AsDB’s Bangladesh Resident Mission also publishes the Bangladesh Quarterly Economic Update. A new bimonthly Economic Indicators Update has been launched. In support of AsDB’s Country Partnership Strategy exercise, several new thematic assessments and sector studies have been completed. These include: thematic assessments for poverty, growth, and poverty reduction, private sector development, governance, environment, and gender, and sector studies for transport, information and communications technology, water resource development, agriculture and rural development, fisheries, regional cooperation, finance, industry and trade sectors, Dhaka–Chittagong economic corridor development, and public sector borrowing capacity study. Several new studies were completed in 2007–08, including Trade Integration of Bangladesh in South Asia: Prospects and Challenges; Improving Institutional Arrangements for Enhancing Manpower Export and Remittance Inflow; Improving the Monitoring System of State–Owned Enterprises; Macroeconomic Framework for Finance Division; Macroeconomic Assessment of the 2007 Flood and Cyclone; and Food Security Assessment. Several new studies will be undertaken in 2008–09 on trade and export competitiveness, regional cooperation, foreign investments and private sector development, and other sectoral issues.

Annex IV. Bangladesh: Statistical Issues

Macroeconomic data provided to the Fund have some shortcomings, but are broadly adequate for surveillance. Bangladesh participates in the General Data Dissemination System (GDDS). A multi–sector technical assistance mission covering national accounts, balance of payments, government finance, and monetary and financial statistics, took place during January 21–February 4, 2008. It found that the authorities have implemented a number of the recommendations of the 2005 data ROSC mission. The ROSC report is available on the IMF website and includes the following recommendations that cut across sectors:

  • Legislation should be enacted to define the role of the Bangladesh Bureau of Statistics (BBS) and to provide it with sufficient powers to fulfill its mandate.

  • Inter–agency cooperation should be improved, particularly for generating consistent data on bank financing of the government and debt.

  • Advance calendars for the release of data should be established, disseminated, and observed.

  • The BBS should also use its website to disseminate data and metadata to ensure simultaneous data release to all users.

Some improvements have been made recently, notably in streamlining public sector coverage in the fiscal accounts and on–going work on a new CPI consumption basket. Key priorities going forward are strengthening BoP statistics through improving the consistency of trade data and developing international investment statistics, improving the source data for national accounts statistics and introducing more frequent and timely dissemination practices, and moving toward adoption of the Government Finance Statistics Manual 2001 (GFSM2001) for fiscal statistics.

National accounts

The paucity of source data remains the principal impediment to improving national accounts statistics and adversely affects the ability of the BBS to absorb technical assistance aimed at improving compilation techniques. The BBS does not conduct an annual national accounts survey of business enterprises, and source data are primarily from benchmark surveys, a census of manufacturing establishments conducted every two years, and biannual household expenditure surveys. Many of the benchmark surveys were conducted over five years ago and are based on outdated sample frames. The 2005 data ROSC recommended that the BBS establish and maintain a business register for all economic units as a basis for surveys, which should be conducted annually. Taking into account cost implications of an annual survey program, the BBS could start with a limited program covering key formal sector activities.

The deficiencies in the data also affect compilation practices. There is heavy reliance on the use of fixed input-output ratios in estimating current value added. Thus, estimates do not always reflect the rapid change in the structure of some industries. In addition, the use of inappropriate deflators and deflation techniques may undermine the reliability of the constant price estimates for some industries. A system of price indices for estimating national accounts at constant prices needs to be developed.

Bangladesh lacks quarterly estimates of GDP, but the compilation of quarterly national accounts, with technical assistance from the AsDB, is included in the authorities’ GDDS plans for improvement. However, given resource constraints, improving the sources and methodology for annual data should be a short–term priority. Improvement in data sources should pave the way for the compilation of advance indicators of economic activity.

Prices, wages, and employment

Price statistics include a consumer price index (CPI), a producer price index (PPI), a wholesale price index (WPI), and unit value indices for external trade. The CPI and WPI are published with lags of two and three months, respectively, while unit value indices of exports and imports are available on an annual basis. The CPI and PPI weights are outdated, and the 2005 ROSC mission reiterated that the CPI should be compiled using updated weights. A household income and expenditure survey (HIES) was carried out in 2005, and it would be appropriate to derive weights from this survey to update the CPI.

Data for wages are prepared monthly, but employment and unemployment data are only available at irregular intervals.

Government finance and debt

The Ministry of Finance has, in the past two years, achieved significant progress in improving the coverage, accuracy, and timeliness of fiscal statistics in line with the recommendations of the 2005 ROSC. Suspense accounts were cleared, data on government–guaranteed external debt compiled, and the timeliness of dissemination fiscal and debt data improved. The 2008 multi–sector mission recommended additional actions to strengthen the analytical usefulness of fiscal data, including to: improve the integration of debt stocks and related financial flows; sensitize donors to the need to promptly provide complete data on Direct Project Assistance; and establish an inter–agency committee to prepare a migration plan to the GFSM2001.

Central government consolidated data according to the classification of the GFSM 2001 has been published in the IMF’s Government Finance Statistics Yearbook for FY2004 and the authorities plan to resume shortly submission of the data for FY2005–FY2007 to the IMF’s Statistics Department.

Monetary accounts

Monthly accounts of the Bangladesh Bank (BB) and other depository corporations are available with a lag of six weeks. In addition, the BB also produces a weekly publication (shared with the Fund) that is available with a lag of about five to six weeks. In line with the ROSC recommendations, the BB embarked on a project to improve monetary and financial statistics (MFS). The concepts, definitions, institutional coverage, classification of financial instruments, and sectorization of institutional units broadly conform to the methodology of the Monetary and Financial Statistics Manual (MFSM). The BB compiles monetary data using the standardized report forms (SRFs) framework, and the SRFs are reported electronically to the IMF on a regular basis, with the result that a consistent time series based on SRF data is available from December 2001. These data are being published in the IFS Supplement on Monetary and Financial Statistics.

Balance of payments

Balance of payments data are broadly on the basis of the Balance of Payments Manual, fifth edition (BPM5). The foreign exchange settlements–based system provides broad coverage of transactions, but there are emerging problems related to the activities of firms in Export Processing Zones (EPZs). They are considered nonresidents under foreign exchange regulations, and problems arise because only partial data are being collected on EPZ activities. The 2008 multi–sector mission urged treating EPZs as residents, in conformity with international statistical guidelines, and to integrate them fully into regular collections.

In the area of goods transactions, the data are collected from two completely different data sources—exports are based on information from customs declarations processed by the National Board of Revenue (NBR) and imports are based on foreign exchange settlements. This recording also gives rise to an inconsistency with the national accounts, where customs trade data are used in compiling net exports of goods and services.

Within the financial account, the 2008 multi–sector mission identified a range of issues relating to the coverage, classification, and sectorization of financial flows and their consistency with the stocks recorded in the international investment position, and made recommendations for improvement to the flows and stocks. Among these issues, the recording of trade credit assets appears to create the most distortion, contributing to an overestimation in the accumulation of foreign assets.

An IIP statement is reported each year to the IMF’s Statistics Department for publication purposes. However, these data have not yet been disseminated by BB. There is an important initiative underway in BB to develop a database on private sector external debt, which will help improve the coverage of external debt in the IIP. There is a need for additional staff resources to advance the work on this project and related work on foreign direct investment.

Bangladesh: Table of Common Indicators Required for Surveillance August 1, 2008

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market–based and officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis–à–vis nonresidents.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published on December 8, 2005, and based on the findings of the mission that took place during March 2–16, 2005 for the dataset corresponding to the variables in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 8, except referring to international standards concerning source data, assessment and validation of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.


Based on material provided by AsDB staff.